Overtime Rule Changes: What Does the FLSA Say?

August 2, 2016

On May 18, 2016, the U.S. Department of Labor updated their rules on overtime pay. This could end up affecting more than four million workers nationwide. The rule changes the standard for determining which workers are eligible for overtime pay under the Federal Labor Standards Act (FLSA). The FLSA governs both public and private workers.

Before diving into how the rules have changed, it will be helpful to have a basic understanding of the Federal Labor Standards Act.

What is the FLSA?

The FLSA dates back to the Great Depression. It was passed in 1938 and was signed into law by President Franklin D. Roosevelt. In its original form, the FLSA established a minimum wage ($0.25/hour) and established a maximum work week (44 hours).

The FLSA applies to businesses that deal with $500,000 or more a year in business/sale volume as well as hospitals, nursing/medical care facilities, schools, and government agencies. Further, the FLSA applies to employees who engage in what can be described as “interstate commerce,” which among other industries also includes childcare workers, maids, and cooks.

In 2016, the FLSA has a federal minimum wage ($7.25 generally and $2.13 for tipped workers). It states that eligible workers must be paid time and a half if they work beyond forty hours a week.

So what has changed?

The new rules increase the number of people eligible for overtime (changing the maximum wage of $455/week to $913/week and the total compensation eligible from $100 to $134,004). Basically, under the old rule, an employee who made more than $455 dollars a week in regular wages did not have to be paid overtime for working more than 40 hours. The new rules more than double that maximum.

Further, the new rules set up an automatic adjustment to these numbers every three years to maintain the salary percentiles the numbers mentioned currently represent. The new rules on eligibility go into effect December 1, 2016. The first adjustment will occur on January 1, 2020.

The new rule is estimated to impact 4.2 million workers across the country, including 158,000 workers in Georgia. Whether or not the new rules will affect you comes down to whether you are an eligible employee, how much you make a week, and how many hours you work. Restaurant workers, teachers, hospital workers, anyone working at large businesses will be affected if they make less than $913 a week and work more than 40 hours.

There are a couple ways the new rules could affect those that will be eligible for overtime as of December 1, 2016. The first way is that overtime is available to hundreds of thousands more individuals here in Georgia. The other potential impact is that workers that would be eligible otherwise could see themselves getting raises to put them above the eligibility threshold.

Whether through overtime pay or a raise, the U.S. Department of Labor estimates that 158,000 workers in Georgia will be elglible to take home more money in just a few months.